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Shoring up capitalism

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They are not talking about it explicitly, but one of the interesting divisions on the centre and right in this election concerns the question: how best to sustain British capitalism? Here, there are two related issues. The first is: are we in a wage-led or profit-led regime? Sometimes (pdf), profit rates can be raised by policies and institutions that promote (pdf) full employment and high wages, as these boost aggregate demand. At other times, though, restoring profits requires policies to depress wages and rebuild profit margins. Tory governments in the 50s and 60s pursued wage-led policies, but Thatcher pursued profit-led ones. Whether wage- or profit-led policies work varies from time to time and place to place, as Marglin and Bhaduri (pdf) and Onaran and Galanis (pdf) have shown.

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They are not talking about it explicitly, but one of the interesting divisions on the centre and right in this election concerns the question: how best to sustain British capitalism?

Here, there are two related issues.

The first is: are we in a wage-led or profit-led regime? Sometimes (pdf), profit rates can be raised by policies and institutions that promote (pdf) full employment and high wages, as these boost aggregate demand. At other times, though, restoring profits requires policies to depress wages and rebuild profit margins. Tory governments in the 50s and 60s pursued wage-led policies, but Thatcher pursued profit-led ones.

Whether wage- or profit-led policies work varies from time to time and place to place, as Marglin and Bhaduri (pdf) and Onaran and Galanis (pdf) have shown.

The second issue is that there is sometimes a distinction between legitimacy and accumulation. This was put by James O’Connor back in 1973:

The capitalistic state must try to fulfill two basic and often contradictory functions – accumulation and legitimation. This means that the state must try to maintain or create the conditions in which profitable capital accumulation is possible. However the state also must try to maintain or create the conditions for social harmony. A capitalist state that openly uses its coercive forces to help one class accumulate capital at the expense of other classes loses its legitimacy…But a state that ignores the necessity of assisting the process of capital accumulation risks drying up the source of its own power. (The Fiscal Crisis of the State, p6)

Brexit, I think, embodies this conflict between legitimation and accumulation. On the one hand, it’s bad for accumulation as it’ll reduce economic activity to some degree. But on the other, you can see it as an attempt to shore up legitimacy by showing that “the elite” can give the people what they want.

Which poses the question: what are the centre and right parties offering in these dimensions?

In wanting to stop Brexit, the Lib Dems are going for accumulation at the expense of legitimacy. Which isn’t to say they are ignoring the latter completely. Jo Swinson claims that:

Politics is no longer about left or right. It's about open or closed. Liberal or authoritarian.

This is a longstanding theme of centrists – an effort to pretend that we are divided by something other than class. In being mostly on the liberal-open side of this divide, capitalists are on the same side as many workers. Insofar as playing up this distinction works, it thus serves to enhance capitalist legitimacy by effacing the capital-labour divide. Raab6a00d83451b31c69e20177447d3e19970d-500wi

In pursuing Brexit, however, the Tories are going for legitimacy at the expense of accumulation. Their attitude to the latter, though, seems ambivalent. On the one hand, promises to raise the minimum wage and public spending suggest a wage-led mindset. But on the other, the prominence in government of Britannia Unchainders such as Patel, Raab and Truss suggest a profit-led tendency – a possibility consistent with the fact that Johnson’s Brexit deal opens the door for cuts in UK labour protections. This division might well reflect a division among capitalists themselves, with what Phil calls “ the most backward, uncompetitive and socially regressive sections of capital” having disproportionate influence.

Another interesting case is the Brexit party. Pursuing the hardest possible Brexit is obviously a threat to accumulation. But I’m not sure either that they are trying to shore up legitimacy. Quite the opposite. In fuelling permanent resentment against the elite they are undermining it: there might in this sense be no great incongruity in Claire Fox’s migration from the RCP to Brexit party. Granted, the resentment is directed at political rather than economic elites. But this is a distinction that might be hard to sustain; the problem with rocking the boat is that there’s no telling who’ll fall out.

None of these answers to the question of how to sustain capitalism seems wholly satisfactory – which isn’t entirely surprising given that none of the parties has the wit to ask the question explicitly. Which is why a few intelligent capitalists, such as Dan Davies, are attracted to Labour.

But why aren’t they offering good answers? It might be that they’re just not smart enough. Sam Bowman and Stian Westlake have suggested ways in which the centre-right might bolster accumulation, but their ideas haven’t yet been embraced. But it might instead be that it’s not at all obvious what would shore up capitalism: wage-led policies might work, but then again might not. If so, the parties’ confusion reflects the messiness of the real world.

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